Commercial Transactions
Pre-Test Questions
Course Introduction
This course provides an in-depth exploration of the legal principles governing commercial transactions, with a primary focus on the sale of goods, negotiable instruments, and secured transactions. Students will examine the formation, performance, and enforcement of commercial contracts, as well as rights and obligations under the Uniform Commercial Code (UCC) and relevant international conventions. The course also addresses issues such as risk allocation, remedies for breach, and the legal mechanisms that facilitate trade in goods and services across domestic and global markets. Through case studies and practical examples, students gain a comprehensive understanding of the legal environment in which commercial transactions occur.
Recommended Textbook
Business Law and the Legal Environment Standard Edition 8th Edition by Jeffrey
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Page 2
F. Beatty
Chapter 1: Introduction to Law
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Q1) Treaties with foreign nations can be made by only ________ and ratified by
A)the Secretary of State;the President
B)the President;the Senate by a two-thirds vote
C)the Department of Defense;the Senate by a plurality
D)the President;the House of Representatives by a three-fourths vote
Answer: B
Q2) Congress passed a law imposing penalties for displaying "indecent" material online where children could see it.If the U.S.Supreme Court subsequently rules that the statute conflicts with the First Amendment of the U.S.Constitution,the statute is void.
A)True
B)False
Answer: True
Q3) In order to determine if the case she was hearing broke the law,Judge Jane referred to prior rulings on the same subject.In other words,the judge is relying on precedent to make her decision.
A)True
B)False
Answer: True
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Chapter 2: Ethics and Corporate Social Responsibility
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Q1) What is the best definition for the term corporate social responsibility?
A)an organization's obligation to contribute positively to the world around it
B)an organization's obligation to maximize profits for its shareholders
C)an organization's obligation to be environmentally responsible
D)an organization's obligation to value its employees above all other stakeholders
Answer: A
Q2) Which person argued that a corporate manager's primary responsibility is to the shareholders of the organization and that managers should make the company as profitable as possible while also complying with the law?
A)John Rawls
B)John Stuart Mill
C)Immanuel Kant
D)Milton Friedman
Answer: D
Q3) Generally speaking,managers feel better about themselves when they behave ethically.
A)True
B)False
Answer: True
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Page 4
Chapter 3: International Law
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Q1) Which of the following statements best describes common law?
A)Common law is law that is the same or similar in all states.
B)Common law is derived from statutes and codes made by legislatures.
C)Common law is based on Justinian and Napoleonic codes.
D)Common law requires judges to base their decisions on prior cases.
Answer: D
Q2) Which of the following is the UN's lawmaking body?
A)the Security Council
B)the Secretariat
C)the International Court of Justice
D)the General Assembly
Answer: D
Q3) The process of Islamic legal and religious reasoning is called A)stare decisis
B)ijtihad
C)shari'a
D)jus cogens
Answer: B
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Chapter 4: Common Law, Statutory Law, and Administrative Law
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Q1) The concept of stare decisis is closely related to the concept of A)precedent.
B)the bystander rule.
C)statutory law.
D)enabling legislation.
Q2) The Administrative Procedure Act imposes controls on agencies by requiring basic fairness in areas not regulated by the enabling legislation.This method of reining in powerful agencies is a form of
A)informational control.
B)political control.
C)judicial review.
D)statutory control.
Q3) Which statement is correct concerning judicial review of an administrative agency's action?
A)Courts usually accept the facts of the case as determined by the agency and often defer to the agency's interpretation of the law.
B)Courts conduct a de novo review of the case.
C)Courts ignore the facts of the case.
D)Courts substitute their opinion for that of the agency.
Page 6
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Chapter 5: Constitutional Law
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Q1) A local school district had a policy that it would not hire bus drivers who had been convicted of driving while under the influence of alcohol.Sven claimed that this practice violated the Equal Protection Clause by unfairly excluding everyone who had been found guilty of DUI.Which standard will the court use to review the bus company's practice?
A)strict scrutiny.
B)intermediate scrutiny.
C)minimal scrutiny.
D)Supremacy Clause scrutiny.
Q2) The "takings clause" prevents the government from taking private property for any reason.
A)True
B)False
Q3) Judicial review can best be described as the power of a federal court to
A)abstain from adjudicating major issues and to leave such matters to legislatures.
B)take it upon itself to decide issues on constitutional grounds.
C)declare a statute or governmental action unconstitutional and void.
D)take private property for public use.
Q4) Discuss the Miller test to determine if a creative work is obscene.
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Chapter 6: Dispute Resolution
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Q1) If interrogatories are being used as a form of discovery,the party being questioned must generally answer all the questions orally under oath.
A)True
B)False
Q2) Pablo,a resident of New Mexico,while driving through Arizona was struck by a SUV driven by Dick,a resident of California.Dick was speeding when the accident happened and Pablo suffered severe injuries that ruined a potential acting career.Pablo's damages are estimated at $200,000.Discuss the court system(s)in which Pablo may bring a lawsuit.
Q3) An appeals court can rule that a trial court's ultimate ruling was correct even if the trial court made a harmless error during the trial.
A)True
B)False
Q4) After being served with a summons and a copy of the complaint,a defendant usually files a pleading known as an answer,briefly replying to each allegation in the complaint.
A)True
B)False
Q5) Briefly describe the process of jury selection.
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Chapter 7: Crime
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Q1) Under the laws of most states,a corporation cannot be held responsible for committing crimes.
A)True
B)False
Q2) List and discuss the protections afforded criminal defendants by the Bill of Rights.
Q3) The police arrived at Otis's apartment one evening and demanded to look around "just to make sure nothing was happening." They had no warrant and had received no complaints about him.Which statement best describes this situation?
A)The police probably should not have bothered Otis,but they really did nothing wrong.
B)The police violated Otis's Fourth Amendment rights.
C)The police were in the right;they must have suspected Otis had committed a crime.
D)The police violated Otis's Sixth Amendment rights.
Q4) Miranda v.Arizona considered the intent requirement in an armed robbery case.
A)True
B)False
Q5) Compare and contrast money laundering and embezzlement.Give an example of each.
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Chapter 8: Intentional Torts and Business Torts
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Q1) Which of the following guarantees that a witness testifying in a court or legislature may never be sued for defamation?
A)recovery principle
B)protected right to slander
C)defamation privilege
D)absolute privilege
Q2) Which of the following statements is correct regarding the differences between contract,tort,and criminal law?
A)Tort and criminal law both impose a punishment for the defendant including prison and/or a fine.
B)Criminal law imposes duties of conduct on all persons.
C)Contract law awards money damages for the plaintiff;tort and criminal law do not.
D)Criminal law is prosecuted by the government.
Q3) In order for a plaintiff to win a case involving intentional infliction of emotional distress,she must prove the defendant acted in an extreme and outrageous manner.
A)True
B)False
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Chapter 9: Negligence, Strict Liability, and Product Liability
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Q1) Anders suffered a shock when his electric radio dropped into the bathtub--while Anders was taking a bath.Anders argued that he did not realize it was dangerous to operate an electric radio near his bathtub.If he sues the radio manufacturer for damages,which claim is he most likely to make?
A)res ipsa loquitur
B)negligent manufacture
C)failure to warn
D)negligent design
Q2) A landowner's highest duty is owed to licensees.
A)True
B)False
Q3) A plaintiff sues in negligence but has no direct proof that the defendant behaved unreasonably.Which of the following is most likely to help the plaintiff?
A)Res judicata
B)Stare decisis
C)Res ipsa loquitur
D)Mens rea
Q4) Discuss the concepts of contributory negligence and comparative negligence.
Q5) List and discuss the elements necessary to establish negligence.
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Chapter 10: Privacy and Internet Law
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Q1) You make an online purchase of a hooded sweatshirt with the logo of the Dallas Cowboys.The next time you log on,your screen has a banner ad for Dallas Cowboy hats and shirts.This banner ad is most likely the result of
A)data mining.
B)a coincidence.
C)the internet crime of theft of private information.
D)encryption software.
Q2) Social media postings,wikis,customer reviews,and blogs are all examples of user-generated content.
A)True
B)False
Q3) Unsolicited commercial email (UCE)or unsolicited bulk email (UBE)messages
A)are commonly known as "cookies."
B)constitute about 90 percent of all email.
C)are estimated to be fraudulent either in content or packaging in approximately one-fourth of all cases.
D)although annoying,do lower the cost of connecting to the internet.
Q4) Explain the core principles in the Fair Information Practices.
Q5) What provisions are commercial email subjected to under the CAN-SPAM Act?
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Chapter 11: Introduction to Contracts
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Q1) Noncompetition agreements are
A)more common today than they were in the past,although policy issues they raised in the 1700s have never gone away.
B)now illegal,as they violate antitrust laws.
C)infrequently litigated.
D)relatively recent developments,first used following the Great Depression in the United States.
Q2) Madison purchases several 50-pound bags of mulch at the local gardening store.An employee carries the bags of mulch to Madison's truck and loads them into the back for her.Will Article 2 of the UCC govern the contract in this situation?
A)No,this is a mixed contract because Madison is paying for both goods and labor.
B)Yes,because the primary purpose of this contract is the sale of goods.
C)No,this is an express contract because both parties explicitly state their intentions.
D)Yes,because Article 2 of the UCC governs all bilateral contracts.
Q3) Discuss the requirements of promissory estoppel.
Q4) Briefly discuss the meaning of bilateral,unilateral,executory,and executed contracts.
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Page 13
Chapter 12: Agreement: Offers and Acceptances
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Q1) Travel Lines offered to sell 10 round-trip tickets to Elaine.Travel Lines stated that the acceptance must be in writing by USPS next-day service.Which of the following acceptances will create a contract between Travel Lines and Elaine?
A)Elaine calls Travel Lines and states that she will buy the tickets.
B)Elaine sends a fax to Travel Lines stating she will buy the tickets.
C)Elaine sends a letter by USPS next-day service to Travel Lines stating that she will buy the tickets.
D)All of the these responses will create a contract between Travel Lines and Elaine since they constitute reasonable means of communication.
Q2) The intent of the offeror to extend an offer to the offeree is generally determined by reference to
A)the beliefs of the offeror.
B)the subjective intention of the offeror.
C)the assumptions of the offeror.
D)the words and conduct of the offeror.
Q3) What elements are necessary for an offer to be valid? Give two examples of nonoffers.
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Chapter 13: Consideration
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Q1) Frank's Furniture Company promised in a written agreement to purchase as much walnut wood "as it desires" from Forestry Products,Inc.If Frank's purchased walnut wood from another source and Forestry Products sued,what is the likely result?
Q2) Upon graduating from college,Kathy announced her plans to enter law school the following fall and to marry Rick in December.Kathy's father was afraid that marriage during her first year in law school might cause her to fall behind in her studies or cause her to drop out of school.He called Kathy and promised her $10,000 if she postponed her wedding until after completion of her first year of law school.Kathy agreed and postponed the wedding for a year.Kathy successfully completed her first year of law school,but soon thereafter,Kathy's father died.The administrator of her father's estate claimed she was not entitled to the $10,000 because there was no consideration for her father's promise.If Kathy sues the estate,she will probably be
A)unsuccessful because her father's death terminated the contract.
B)successful because there was consideration.
C)unsuccessful because her father received no benefit.
D)unsuccessful because it was merely fatherly advice not to get married during the first year of law school.
Q3) What two exceptions did the UCC create for accord and satisfaction check cases?
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Chapter 14: Legality
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Q1) Differentiate between licensing requirements designed to protect the public and those designed to generate revenue.
Q2) E-mation entered into a contract with a consumer,Ezra,a recent immigrant to the United States who spoke very little English and had no formal education.The contract provided for Ezra to pay $2,500 for a computer system.The system was worth $400.If E-mation sued Ezra for enforcement of the contract,what is the most likely result?
A)The contract is enforceable because of usury statutes.
B)The contract is unenforceable because it is ancillary to a legitimate bargain.
C)The contract is enforceable because of the exculpatory clause.
D)The contract is unenforceable because it is unconscionable.
Q3) A contract may violate public policy even if the agreement does not violate a statute.
A)True
B)False
Q4) What are the two most common settings for legitimate non-compete agreements?
A)real estate purchase and employment relationship
B)sale of a business and real estate purchase
C)real estate purchase and insurance purchase
D)sale of a business and employment relationship
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Chapter 15: Voidable Contracts: Capacity and Consent
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Q1) Which of the following statements,if made by a seller who knows the statement to be untruthful,would NOT be misrepresentation of material fact resulting in a cause of action for fraud?
A)"This horse is only six years old."
B)"There is no better car in the world."
C)"The tires have less than 5,000 miles on them."
D)"This car gets 28 miles per gallon."
Q2) Describe legal capacity and discuss how it applies to minors entering into and cancelling contracts.
Q3) A party injured by fraud generally has the choice of suing for damages or rescinding the contract.
A)True
B)False
Q4) If a salesperson says,"This is a great car and it's really fun to drive," but the car turns out to be a lemon,the salesperson has committed fraud.
A)True
B)False
Q5) Discuss the meaning of "material fact" in fraud situations.
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Chapter 16: Written Contracts
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Q1) Does the statement "The sale of goods will not be enforceable unless there is some writing,signed by the defendant,indicating that the parties reached an agreement" accurately reflect the UCC's basic rule?
A)No.It should also state that the contract must be signed by both parties,not just the defendant.
B)No.It should state that the contract must require all of the terms of the agreement to be in writing.
C)No.It should state that the contract must be for the sale of goods of $500 or more.
D)Yes.The wording accurately reflects the UCC's basic rule.
Q2) Contracts that cannot be performed within __________ are unenforceable unless they are in writing.
A)one month
B)six months
C)one year
D)two years
Q3) E-signatures are valid in all 50 states.
A)True
B)False
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Chapter 17: Third Parties
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Q1) Shirley is an actress under contract with Twentieth Century.Shirley agreed to perform the lead role in a musical to be filmed in Hollywood by Twentieth Century.At the last minute,Twentieth Century decided to scrap the musical and assigned its rights in Shirley to MGM.MGM was planning to film a western in Australia requiring Shirley to spend six months filming in Australia.Can Shirley successfully prevent this assignment?
Q2) Ted and Alice own their recreational vehicle subject to a security agreement to Third U.S.Bank to secure the repayment of the purchase money loan.Ted and Alice sell their RV to Bob and Carol,who agree to take over the loan payments to the bank.There is no novation with the bank.Under these facts,if Bob and Carol do not make the loan payments,Third U.S.Bank
A)can sue Bob and Carol only.
B)can sue Ted and Alice only.
C)can sue Bob,Carol,Ted,and Alice.
D)cannot sue anyone but can repossess the RV.
Q3) If Casey assigns her rights to receive income from rental property to Errol,then Errol will legally acquire any rights to the income held by Casey.
A)True
B)False
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Chapter 18: Contract Termination
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Q1) Harry agreed to pay $100 to rent a rooftop spot in downtown Seattle to watch the New Year's Eve festivities.The festivities were unexpectedly canceled because of concern over a terrorist attack.Harry is
A)obligated to pay the $100.
B)not obligated to pay under the commercial impracticability doctrine.
C)not obligated to pay under the force majeure doctrine.
D)not obligated to pay under the frustration of purpose doctrine.
Q2) In January,All Seasons,Inc.ordered $4,000 of fireworks from Kaboom Ltd.with delivery to be on or before June 1.On April 15,Kaboom notifies All Seasons that it will not be able to perform the contract as agreed.How will the law characterize Kaboom's actions? Does All Seasons have to wait until June 1 before buying fireworks from another supplier?
Q3) What does the term "substantial performance" mean? What factors are generally considered when determining whether one of the parties has substantially performed?
Q4) The law strongly prefers to apply the objective standard to contracts because A)it requires both parties to carry out their obligations in good faith.
B)the subjective standard gives unlimited power to the promisee.
C)it is almost impossible to breach a contract under this standard.
D)the subjective standard gives unlimited power to the promisor.
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Chapter 19: Remedies
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Q1) Specific performance is always available in
A)agreements involving farm goods.
B)agreements involving vehicles.
C)real estate contracts.
D)employment contracts.
Q2) Identify and describe the principal contract interests a court may seek to protect.
Q3) Bob,a house builder,contracts with Ollie to build a house on Ollie's lot.The total price of the construction is $100,000,$20,000 of which will be Bob's profit.After Bob has put $10,000 worth of materials into the house,Ollie wrongfully refuses to let him finish the house.If Bob sues for damages,he will be able to collect
A)$10,000.
B)$20,000.
C)$30,000.
D)$100,000.
Q4) Expectation interest can best be described as money spent in reliance upon the agreement.
A)True
B)False
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Page 21
Chapter 20: Practical Contracts
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Q1) Bob,a house painter,contracts with Ollie to paint a rental house that Ollie owns.Bob hires Rob to take his place as the painter on this contract.What has Bob done?
A)made a scrivener's error
B)severed the contract
C)delegated his duties
D)assigned his rights
Q2) In which of the following situations is it likely that you may NOT need a written contract?
A)You are dealing with a party you do not know well,so you need to remain flexible.
B)You are buying land from a member of your family.
C)The terms of the agreement are simple and the value of the transaction is small.
D)You have negotiated with the other party enough that you both know what the other person intends.
Q3) Lawyers prefer to negotiate touchy subjects as they arise rather than address them at the beginning of a relationship.
A)True
B)False
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Chapter 21: Introduction to Sales
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Q1) Which article of the UCC covers the sale of goods?
A)Article 1
B)Article 2
C)Article 3
D)Article 4
Q2) Which of the following contracts is most likely to be declared unconscionable?
A)a consumer sales contract that charges 300 times the fair market value of the goods
B)a consumer sales contract that limits the consumer's remedies to repair or replacement
C)a contract between wholesaler and retailer that adds delivery charges at 15% of the costs of the goods
D)a sales contract between wholesaler and retailer that limits remedies such as consequential damages
Q3) Which of the following would be considered a merchant under the UCC?
A)A woman sells her pistol to someone responding to a classified ad.
B)A man who owns a jewelry store sells his used car to a neighbor.
C)A gun dealer sells a rifle to someone who enters his shop.
D)All of these are correct.
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Chapter 22: Ownership, Risk and Warranties
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Q1) Marco Manufacturing contracted to sell Kurtz Industries 3,000 iron clasps.The contract specified: F.O.B.Kurtz Industries.Upon arrival and inspection,the goods were rejected by Kurtz Industries because they did not conform to the contract specifications.In transit back to Marco Manufacturing,the common carrier's truck overturned and completely destroyed the clasps.Which statement is correct?
A)Marco may sue Kurtz for the contract price,as risk of loss transferred to Kurtz at the F.O.B.point.
B)Kurtz will not be liable for the purchase price.The risk of loss had not yet transferred since the goods were nonconforming.
C)The loss will be split between the parties on a 50/50 basis.
D)The loss will be assigned to the party who can best bear the loss.
Q2) Crops are considered identified when they are planted.
A)True
B)False
Q3) A contract that requires a seller to deliver goods to the carrier is a
A)destination contract.
B)shipment contract.
C)C.I.F.contract.
D)C.O.D.contract.
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Chapter 23: Performance and Remedies
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Q1) A buyer's material breach gives the seller the right to refuse to deliver the goods.
A)True
B)False
Q2) Bryson Hardware accepted delivery of the 50 door handles it ordered.If it later finds the handles do not conform to the contract specifications and it wants to revoke its acceptance,it may return the goods only if
A)it shows the original acceptance of the goods never occurred.
B)it shows that the defects substantially impair their value.
C)it can prove it is commercially impracticable for it to keep the goods.
D)the documents of title are in order.
Q3) "Course of dealing" refers to prior commercial transactions between the same parties.
A)True
B)False
Q4) If a seller cures within a reasonable amount of time,the contract
A)has been performed.
B)is breached.
C)is void.
D)is voidable.
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Chapter 24: Secured Transactions
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Q1) Great State Bank loans money to Seth,securing the loan with property owned by Seth.Great State Bank is advised by its attorney to file a financing statement.Great State Bank doesn't understand why it should spend the extra money for this filing,since Seth has told them that he has no other creditors.Why should Great State Bank file a financing statement?
A)There are criminal penalties for failing to file.
B)The financing statement allows Great State Bank to repossess the collateral on default without a court order.
C)The financing statement will protect Great State's priority rights with other creditors by giving notice to other creditors that it claims a security interest in the collateral.
D)Filing the financing statement is necessary to complete the attachment requirement in order to create a security interest.
Q2) A security interest in money may be perfected by
A)filing a financing statement.
B)creating a PMSI.
C)possession only.
D)redemption.
Q3) Explain the difference between attachment and perfection.
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Chapter 25: Creating a Negotiable Instrument
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Q1) To be negotiated,bearer paper must simply be delivered to the recipient.
A)True
B)False
Q2) Tim wrote a negotiable note.Subsequently,Tim's debts were discharged in bankruptcy.If a holder in due course presents the note for payment,Tim does not have to pay.
A)True
B)False
Q3) In June,The Seascape Gallery sells an oil painting to Collegiate Systems,Inc.Collegiate promises to pay for the painting in three months.The gallery prepares a draft ordering Collegiate Systems to pay $3,000 to First Bank on September 15.Collegiate Systems signs the draft.The draft is a A)sight draft.
B)time draft.
C)trade draft.
D)future draft.
Q4) Matt wrote a $500 check to Alistar for some yard work that Alistar had done.What will Alistar have to do negotiate this instrument to Totally Tough,Inc.in payment for some yard equipment Alistar had bought?
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Chapter 26: Liability for Negotiable Instruments
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Q1) The accidental destruction of a negotiable instrument will not result in its cancellation.
A)True B)False
Q2) An accommodation party and a co-maker of a note have the same liability on an instrument.
A)True B)False
Q3) Cecilia made a check out to Gideon for $15.Gideon fraudulently changed the check to read $150,and cashed it at Corner Bank.Is Cecilia discharged from liability on the check?
A)Yes,Cecilia owes nothing on the check because alteration of a check is a real defense and real defenses are good even against holders in due course.
B)No,Cecilia pays $150 because of the impostor rule.
C)No,Cecilia pays $150 because she is not an indorser or accommodation party.
D)Yes,Cecilia owes nothing unless Corner Bank is a holder in due course,in which case she owes the original $15.
Q4) List and explain the five different ways to discharge an instrument according to Article 3 of the UCC.
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Chapter 27: Accountants Liability
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Q1) John is a CPA in charge of auditing his client,McMillen & Co.John's duty of care to McMillen will most likely be breached if John
A)gives his client an oral report instead of a written report.
B)gives his client incorrect advice based on an honest error in judgment.
C)fails to give tax advice that would save his client money.
D)fails to follow generally accepted auditing standards (GAAS).
Q2) Under the amended Securities Exchange Act of 1934,accountants are liable jointly and severally whether or not they knew they were violating the law. A)True
B)False
Q3) Accounting contracts can be either written or oral. A)True
B)False
Q4) One of the accountant's most important roles is to serve as an independent evaluator of the financial statements issued by management to investors and creditors. A)True
B)False
Q5) Under what circumstances are accountants liable to their clients for fraud?
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Chapter 28: Agency Law
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Q1) In the case of an undisclosed principal,a third party
A)can only recover from the principal.
B)can only recover from the agent.
C)cannot recover at all.
D)can recover from either the agent or the principal.
Q2) Grant is a delivery person for Watkins Furniture.One day,after delivering a chair to Nadine's house,he stopped at a fast food restaurant to get a sandwich at the drive-through window.As he was leaving the parking lot,he accidentally hit the rear of Blanche's car.Discuss the possible liability of Watkins for Grant's accident.Would there be any difference in the potential liability of Watkins if Grant had the accident after driving 30 miles away to visit a friend?
Q3) If Denise is hired to work as a cashier,she has the implied authority to do acts reasonably necessary to carry out her job.
A)True
B)False
Q4) Andrew has been hired to do some work for Rossi Enterprises.What factors would a court consider in determining if Andrew is an employee or an independent contractor? Why does the designation matter?
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Chapter 29: Employment and Labor Law
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Q1) Jenna works for Mega Corp as a production employee.She is paid an hourly wage.She wishes to negotiate her own employment contract with management since she does not agree with the terms of her union's collective bargaining agreement.Can Jenna negotiate her own contract? Explain.
Q2) A union declares its workers are going on strike.The employer states the collective bargaining agreement is still in force for another eight months and that it contains a no-strike clause.The union claims the CBA's no-strike provision is not binding since new union leadership is in place.Which of the following statements is correct?
A)The union can strike since new leadership is now in control.
B)The union can strike since no-strike provisions have been ruled by the courts to be unenforceable.
C)The union cannot strike,as strikes to exert economic pressure on management are prohibited by the NLRA.
D)The union cannot strike because of the no-strike clause in the contract.
Q3) As a general rule,employers have a legal obligation to disclose information about former employees to potential future employers.
A)True
B)False
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Chapter 30: Employment Discrimination
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Q1) What accommodations might an employer be expected to make for a disabled employee? What standard is used to determine whether an employer would be expected to make these accommodations?
Q2) There are four types of illegal activity under the Civil Rights Act of 1964.Which choice lists these four?
A)disparate treatment,disparate impact,hostile environment,and retaliation
B)disparate employment,unfair promotions,hostile environment,and unfair firing
C)false reports,retaliation,prima facie discrimination,sexual harassment
D)religious disparaging,racial profiling,sexual harassment,unfair promotions
Q3) Which of the following is TRUE about affirmative action?
A)Affirmative action is required by Title VII.
B)Affirmative action is prohibited by Title VII.
C)Affirmative action is allowed in government contracts if it can show the programs are needed to overcome specific past discrimination.
D)Affirmative action programs are usually voluntary on the part of employers,since courts have no power to order remedies for past discrimination.
Q4) Explain the Title VII requirements on affirmative action,and identify three sources of affirmative action programs.
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Page 32
Chapter 31: Starting a Business: Llcs and Other Options
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Q1) For those wishing to purchase a franchise,the Federal Trade Commission acts as a guardian ensuring that the business idea is sound and that the information in the Franchise Disclosure Document is accurate.
A)True
B)False
Q2) Social enterprises are organizations that pledge to behave in a socially responsible manner,even as they pursue profits.
A)True
B)False
Q3) Corporations have perpetual existence.
A)True
B)False
Q4) What federal agency requires that the seller of a franchise give the potential buyer a Franchise Disclosure Document (FDD)and audited financial statements?
A)the Securities and Exchange Commission (SEC)
B)the Interstate Commerce Commission (ICC)
C)the Federal Trade Commission (FTC)
D)the Franchise Sales Commission (FSC)
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Chapter 32: Partnerships
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Q1) Anne and Mike were winding up their partnership.Mike was approached by a person who wanted the partnership to do some work for him.Mike agreed that the partnership would do the work.Generally speaking,in such a situation
A)Anne is not liable since the partnership was in the winding-up phase.
B)Anne is not liable since she did not consent to the work.
C)Anne is not liable since Mike's conduct was wrongful.
D)Anne is liable unless she filed a statement of dissolution with the secretary of state within 90 days of when Mike entered the contract.
Q2) In determining if a partnership exists,the courts will consider all of the following factors EXCEPT
A)management of the business.
B)actions of the persons involved.
C)the nature of the business.
D)profit.
Q3) Brock and Heidi agree to jointly run a fundraiser for the nonprofit children's hospital.Even if they don't have a formal,written agreement,they have formed a partnership.
A)True
B)False
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Chapter 33: Life and Death of a Corporation
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Q1) Carey decided to incorporate her business under the name yStar Inc.Before yStar was incorporated,Carey signed a contract in the name of yStar,Inc.to have some office space remodeled.Which statement is correct?
A)yStar is liable on the contract because the contract was signed in its name.
B)yStar becomes liable on the contract as soon as it is incorporated.
C)yStar is liable on the contract if the contractor knows that the corporation does not yet exist.
D)yStar will be liable on the contract only if the corporation adopts the contract.
Q2) What is an exculpatory clause?
A)a requirement that the company pay the legal fees of directors who are sued for actions taken on behalf of the company
B)a provision that if a party enters into a contract believing in good faith that the corporation exists,he cannot later take advantage of the fact that it does not
C)a requirement that a corporation cannot undertake any transaction unless the charter permits it
D)a provision that protects directors from personal liability to the corporation and its shareholders
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Chapter 34: Management Duties
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Q1) Which of the following describes the duty of loyalty?
A)It requires managers to make decisions they reasonably believe to be in the best interest of the corporation.
B)It prohibits managers from making a decision that benefits them at the expense of the corporation.
C)It requires consideration of the interests of the surrounding community.
D)It requires using care that an ordinarily prudent person would take in a similar situation.
Q2) A staggered board of directors is an example of A)a hostile takeover maneuver.
B)a special committee.
C)a shark repellent.
D)None of these are correct.
Q3) For the business judgment rule to apply,the manager must A)be trying to resolve a conflict of interest.
B)have exercised extraordinary care in resolving the situation.
C)have acted in the best interests of the corporation.
D)prove he or she was aware of the decision being made.
Q4) What is the definition of the business judgment rule?
Q5) List and discuss the three ways to acquire control of a corporation.
Page 36
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Chapter 35: Shareholder Rights
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Q1) When can shareholders sue a corporation directly?
A)only if their own rights have been violated
B)only if the corporation has been wronged
C)only if they hold at least 10 percent of company stock
D)at any time they wish
Q2) A public company instituted a clawback policy.What does this mean?
A)The company can require the CEO and CFO to reimburse the company for any bonus or profits they received from selling company stock within a year of the release of flawed financials.
B)At least once every three years,companies must take a nonbinding shareholder vote on the compensation of the five highest-paid executives.
C)The company is prohibited from expelling shareholders unless the firm pays a fair price for the minority stock and the expulsion has a legitimate business purpose.
D)The company has decided that the compensation level of its executives is not in the company's best interests,so it reduces all executive pay levels by a certain percentage.
Q3) Explain the ways in which the federal government has tried to change the landscape of corporate governance and executive compensation.
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Chapter 36: Bankruptcy
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Q1) Chapter 7 bankruptcy is also known as A)reorganization.
B)reaffirmation.
C)voluntary bankruptcy.
D)straight bankruptcy.
Q2) Brad was having financial difficulties and thought bankruptcy might be in his future.He transferred his sports car to his brother with the agreement that if he didn't file for bankruptcy within the next 18 months,his brother would return the car to him.Brad did file for bankruptcy in 10 months.The bankruptcy trustee can void the transfer and bring the car back into Brad's estate for the purpose of providing assets for Brad's creditors.
A)True
B)False
Q3) Creditor claims are divided into classes,and the highest class must be satisfied in full before going to the next category. A)True
B)False
Q4) What are the three main purposes of the federal Bankruptcy Code? How are these purposes supported and fostered in the Code?
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Chapter 37: Securities Regulation
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Q1) Regulation Crowdfunding permits privately held companies to sell up to $1 million in securities in any 12-month period provided they meet a number of criteria.
A)True
B)False
Q2) The SEC has enforcement powers,including the power to issue cease and desist orders,to levy fines,and to confiscate profits from illegal transactions.
A)True
B)False
Q3) The 1934 Act requires companies with a class of stock that is publicly traded to make ongoing,regular disclosure with the SEC.
A)True
B)False
Q4) Offerings under Regulation A of the Securities Act of 1933,although called private offerings,are really small public offerings.
A)True
B)False
Q5) Discuss the process an issuer follows for either an IPO or a secondary offering.
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Page 39
Chapter 38: Antitrust
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Q1) A vertical merger involves companies at different stages of the production process.
A)True
B)False
Q2) Which of the following cases involved price-fixing?
A)Coalition for a Level Playing Field,L.L.C. ,v.Autozone,Inc.
B)United States v.Apple,Inc.
C)United States v.Waste Management,Inc.
D)New York v.Actavis PLC
Q3) What is the Justice Department's current position relative to reciprocal dealing agreements?
A)The Justice Department actively enforces this illegal activity.
B)The Justice Department is only concerned about these agreements if a large,national company is involved.
C)The Justice Department only gets involved if such an agreement will foreclose a significant share of the market and if the participants agreed not to buy from other competitors.
D)The Justice Department only gets involved if such an agreement is "decidedly uneven," meaning that one company benefits significantly more than the other.
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Chapter 39: Consumer Protection
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Q1) Which of the following is a provision of the CARD Act?
A)Lenders cannot bribe an appraiser to misstate a home's value.
B)Manufacturers must report all potentially hazardous product defects within 24 hours of discovery.
C)Credit card bills must be mailed at least 21 days ahead of their due dates.
D)All of these are correct.
Q2) The maximum rate of interest for credit transactions is established by
A)state law.
B)federal law.
C)the Federal Reserve Board.
D)the FTC.
Q3) Under the Truth in Lending Act,a lender must disclose all of the following EXCEPT
A)the average percentage rate charged by competitors.
B)the amount financed.
C)the annual percentage rate (APR).
D)the finance charge.
Q4) What are the three tests or elements used by the FTC to determine whether a particular act is an unfair trade practice?
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Chapter 40: Environmental Law
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Q1) An Environmental Impact Statement must be prepared for every major federal action that significantly affects the quality of the environment.
A)True
B)False
Q2) Which of the following would be considered a stationary source?
A)a locomotive
B)an automobile
C)a factory
D)All of these are correct.
Q3) The Toxic Substances Control Act regulates
A)chemicals other than pesticides,foods,drugs,and cosmetics.
B)insecticides.
C)natural gas.
D)pesticides.
Q4) A Japanese company operates a ship called the Kinia.If the Kinia sails in U.S.waters,it must comply with design standards set by the Oil Pollution Act of 1990.
A)True
B)False
Q5) Discuss the major provisions of the Clean Air Act.
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Chapter 41: Intellectual Property
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Q1) Briefly define patent,copyright,and trademark,and explain how long they last.
Q2) A trademark lasts for
A)20 years after the application is filed.
B)70 years after the death of the creator.
C)10 years,but it can be renewed for an unlimited number of terms as long as it is used.
D)as long as it is kept confidential.
Q3) A new savings and loan bank called Federal Deposit Bank applied for a trademark of its name.Why will this bank probably not receive trademark approval?
A)It is similar to an existing mark.
B)It is a generic trademark.
C)It is a deceptive mark.
D)It is a scandalous or immoral mark.
Q4) The vast majority of patents that are issued are
A)design patents.
B)plant patents.
C)utility patents.
D)intellectual patents.
Q5) Identify the main provisions of the Digital Millennium Copyright Act.
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Chapter 42: Real Property and Landlord Tenant Law
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Q1) Grandpa owns a farm.In a signed writing,Grandpa gave Sue the irrevocable right to use a road on his farm so that Sue could more easily reach her own property.What kind of interest in land did Grandpa give to Sue?
A)easement by grant
B)easement by implication
C)reserved easement
D)easement by prescription
Q2) Professor McDonald owns the following property.Which of these is NOT real property?
A)Professor McDonald's restored Victorian-era house
B)the grove of peach trees on Professor McDonald's property
C)custom-made bookshelves fitted into the library of Professor McDonald's home
D)the books that line Professor McDonald's bookshelves
Q3) Discuss the tenant's and the landlord's basic duties under a landlord-tenant relationship.
Q4) Carlos conveys his property "to Noah for life,then to Maxie." Noah has a life estate,and Maxie has a remainder.
A)True
B)False
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Chapter 43: Personal Property and Bailment
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Q1) Mitch takes his two best suits to Quality Cleaners and receives a ticket as a receipt.Quality tells Mitch his suits will be cleaned and will be ready to be picked up on Monday.Another customer overhears the exchange and early on Monday goes to Quality,convinces the worker he is Mitch but that he has lost his receipt.He identifies and retrieves the suits,which happen to fit him perfectly too.Quality Cleaners
A)is strictly liable to Mitch for the suits.
B)is liable to Mitch only if Mitch can prove Quality was grossly negligent.
C)has no liability unless Mitch proves Quality did not use ordinary care.
D)will avoid liability if the receipt contained an exculpatory clause excluding gross negligence.
Q2) If property is mislaid,the finder of the property will have a superior claim to possession of the property against everyone except the true owner.
A)True
B)False
Q3) While shopping at the mall,Everett's wallet fell out of his pocket.Jon found the wallet.The wallet is abandoned property and Jon may keep it.
A)True
B)False
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Chapter 44: Planning for the Future: Wills, Trusts and Insurance
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Q1) Abraham has just purchased his first car.His bank,First State Bank,loaned him the money to buy the car and has required him to purchase insurance to protect the car as the collateral for the loan.Which basic types of coverage should Abraham buy to satisfy the bank requirement and to best protect himself from the risks of operating an automobile?
A)collision coverage only
B)collision and comprehensive coverage only
C)collision,uninsured motorist,and comprehensive coverage
D)collision,uninsured motorist,comprehensive,and liability coverage
Q2) Jose and Juanita are first cousins.Jose lives in San Francisco,California;Juanita lives in Toronto,Canada.The two have met only once in life and may never meet again.Nonetheless,because they are blood relatives,Juanita has an insurable interest in Jose's life.
A)True
B)False
Q3) Mountain Ridge Bank has been named trustee for a $100,000 trust Fred and Martha Betts established for "the living children of the grantors." List the requirements for establishing a trust.Identify the primary obligation of the trustee,and discuss the fiduciary duty of the trustee.
Page 46
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